Academic theory about investing in stocks is a lot like a map of the London Tube. The map can get you from Point A to Point B, but it is not actually an accurate map of the rail line underground. It is only an easy-to-read, simplistic version of what is really going on.
However, just because the map shows a 90° turn doesn’t mean that the rail line actually makes a 90° turn at that specific point in the line. The academic theories behind investing are a lot like this, in the sense that they can often get you to where you’re going over the full route, but if brace yourself for stocks to make a specific turn at a specific time based on the theories, you’re likely to lose your balance, look like a fool, or both. Read on.